Personal Finance 

3 Ways to Kill the Penny

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Beat Up PennyYou all probably know my stance on the penny, I think we should kill the penny. Unfortunately, the only legislator willing to put some teeth in the move was ousted after his involvement in a bunch of scandals in 2007. Since then, there hasn’t been a peep out of Congress on the issue though I suspect it’s because there are a lot of other, more pressing, issues on the docket.

So, it’s up to us to figure out a way to give the penny (and maybe even the nickel) the boot.

Why Kill The Penny?

Before we go into how to kill the penny, let’s take a look at why. The main reason is that it’s utility as a coin is very limited, it’s expensive to produce, and it consumes a lot of resources. The main reason why it’s expensive to produce is because it contains zinc, which is getting more expensive each year as demand for zinc grows in places like China.

They didn’t break it down in the 2009 Annual report but in 2008, this is how much it cost to produce each coin (materials plus delivery). In 2008, both the nickel and the penny were negative seigniorage (or seigneurage), meaning they cost more to make than they were worth.

  • $1 – $0.26
  • Half Dollar- n/a
  • Quarter – $0.1089
  • Nickel – $0.0884
  • Penny – $0.0142

So, how do we kill it? Joining Facebook groups, writing to your legislator, and complaining to your friends won’t work by itself. It might make you feel better, but for real change you have need to have an economic impact.

Use More Plastic

As more and more of our transactions occur electronically, the less reliant we are on paper and metal currency. The Denver and Philadelphia Mints produce 65 million to 80 million coins a day. While many of these are the much maligned penny, the more we use electronic payment systems, the fewer coins we’ll need.

In 2005, the U.S. Mint produced 14.2 billion coins for circulation according to their 2005 Annual Report. In 2009, it reached a 45-year low of 5.2 billion because of “fewer cash transactions.” (2008 was 9.97 billion)

If you want to kill the penny, use your credit, debit, or charge card.

Don’t Hoard Pennies

You probably don’t hoard coins intentionally and you probably don’t even think of it as hoarding. You have a piggy bank or a coin jar and you toss your loose change into that jar every time you go home. It’s your vacation fund or your golf fund or your shopping fund. If you want to kill the penny, or more specifically kill new pennies, don’t keep them in your home. Don’t leave them in your couch. Take them to the bank and send them back through the system. The Mint produces coins based on demand and the more coins we have locked away in piggy banks and sock drawers, the more they need to produce.

You get better interest rate in a online savings account anyway.

Use $1 Coins

Why would using more $1 coins help kill the penny? It won’t, but it’ll achieve the same objectives as killing the penny. The argument against the penny is that it’s expensive to produce and not used very often. Well, by using more $1 coins, you are reducing the amount of waste in the currency system. The life expectancy of a coin is 30 years, compared to 18 months for a paper bill. You can buy them at cost with free shipping from the Mint’s $1 Direct Ship program.

By using more coins, you are reducing how many bills need to be produced each year. And if there are places you like going to that only take cash, these are a mighty fine way to pay and still get cash back.

So do your part. 🙂

(Photo: caitlinator)

{ 50 comments, please add your thoughts now! }

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50 Responses to “3 Ways to Kill the Penny”

  1. billsnider says:

    I am forever picking pennies up. People throw them away. They fatten my piggy bank.

    Bill Snider

    • Jim says:

      One cent at a time… I pick up change when I see it but I don’t really think of it as “fattening” my piggy bank as much as I’m cleaning up after a litterbug.

    • Shirley says:

      My husband walks about 5 miles every morning and always comes home with found coins. It averages out to about $5 each month.

  2. billsnider says:

    You are on the wrong issue. congress should be spending their time getting rid of the pound/foot system in favor of the metric system. This hurts our country in so many ways.

    Bill Snider

  3. Fred says:

    From an economic point of view it does make sense to retire the penny. But, as a coin collector, I hate to see it go. Collecting pennies are a great way for kids to get into coin collecting.

    • I used to collect coins and it was a joy to collect a large collection of pennies. I often would find wheat pennies as a kid and get really excited.

      I do agree though, these coins should not cost more than they are worth, it just doesn’t make sense.

  4. I hoard, but only because I hate carrying the stupid things around. I have a big container at my desk, and another at home. Every once in a while, we cash them in at the back and dump the money into the kids’ bank accounts.

  5. Rob O. says:

    Seems that from a collector’s perspective, killing the penny would only help – it’d drive up the collectible value of the coin, wouldn’t it?

    I like the idea of using $1 coins – especially for kids – if for no other reason than that they’re uncommon, not ordinarily used. A dollar bill is passe, but a dollar coin is something kinda special. And since vending machines don’t usually take dollar coins, I’d think that would make for an added incentive for the receiver to save rather than spend them.

    • Glenn Lasher says:

      I have seen many vending machines, old and new, that take dollar coins. The old machines continue to take dollars as they always have if they were built in the 80’s. The newer ones take them because the mechanism is there already, in order to accommodate deployment in Canada, where they have had the sense to end the one and two dollar bills.

  6. daenyll says:

    My family has always picked up coins and any pocket change got put in the empty PB jars, and once a quarter (or more often if necessary) we’d sit down and roll them and add them take them to the bank.

  7. Scottix says:

    One question is how do we handle the rounding issues on sales tax. Should they round up or down? Hmmm maybe this will cost us more than we think.

    • Glenn Lasher says:

      Well, what do they do now? Whatever that is, that is what they will do. Surely you don’t think taxes always come out to a round number of pennies? Surely you don’t even believe it is frequent that it comes out to a round number of pennies? I would say that it is, in fact, truly rare, especially in a world of prices that end in “.99”

      Consider a $4.99 widget. Is that a common price for something? Sure it is. Now apply my county’s tax rate of 8%, and you get $5.3892.

      Consider your gasoline purchase. Even if you buy a non-fractional number of gallons, unless it is a multiple of 10 gallons, then something is getting rounded, because gasoline is priced to three digits.

      So it already happens.

      Now, how about the cost? If everyone rounds up, then it would be upper-bounded at $0.05/transaction. If everybody rounds 4/5 as they should, then it will be a wash, with any given transaction having a maximum error of $0.025. Are you really going to wast your time over an amount of money less than a nickel? If so, I would suggest you need to re-evaluate the value of your time.

    • billsnider says:

      My father told me that during WWI they gave you a piece of candy when the change was 1-2 cents. Everybody was happy.

      What do you think?

      Bill Snider

      • Shirley says:

        I think that while that was a viable concept back then, I doubt that there is even such a thing as one (or even two or three) cent items anymore. 🙁

  8. Shirley says:

    Bookkeepers hate pennies… 😉

  9. The problem that I see with getting rid of the penny is that stores don’t make prices as is, there is almost always tax, so if the price comes out to an amount that will need a penny the buyer will either have to use a card to pay for it or the store will have to accept less.

    • freeby50 says:

      Just round off to the nearest nickel. Same way they currently have to round off to the nearest cent. It would all even out in the end.

  10. When we started cleaning out my father in law’s house after he passed away we found 2 gigantic containers full to the top with pennies. They’re still sitting in the basement…gotta bring them to the bank because there has to be a couple hundred bucks in there.

  11. Frank says:

    Cash makes one more or less invisible, a virtue plastic conspicuously lacks. I value my privacy, including not being deluged with advertising. Cash does a lot to promote that privacy and if it comes at the cost of having a few extra pennies in my poke, it’s more than worth the negligible bother. Besides, isn’t this a pretty insignificant thing to worry about?

  12. Max says:

    If the main reason why the penny is so expensive to make is because it contains zinc, wouldn’t a simple solution be to make it of some other metal combination that doesn’t contain zinc. I’m guessing the nickel is more expensive to make as well because it contains copper. It seems like we could just make our coinage out of cheaper materials, but maybe there are other reasons we use these metals, I don’t know.

    • Glenn Lasher says:

      They could.

      Some countries have some of their coins made of aluminum.

      We make pennies out of zinc because it got too expensive to make them out of copper sometime in the 70’s.

      The real question, though, is this: Is this problem worth solving? I’m with Jim. Kill them off. Nickels, too.

  13. Travis says:

    I am a huge proponent of killing the penny or at least of making it out of less expensive materials.

    • billsnider says:

      I have a good idea.

      Instead of killing the penny, jst send them to me. i will gladly take them my you.

      Bill Snider

  14. I wonder if all these coinstar machines have done anything to decrease the number of small coins people have collected for years in various change jars?

    I see these machines everywhere.

  15. J. Money says:

    Nooooooooo I love my pennies!!!! Why don’t you take away the dime instead? Those little bastards are so small and are always falling out of my pockets 😉

    • Glenn Lasher says:

      We could compromise and make a ten-cent nickel like they use in the Bahamas. It’s slightly larger than a five-cent nickel, and looks nice to boot.

  16. mike d says:

    My way to do it would be to introduce some randomizer build into most cash registers. Say, your total comes out to $5.28. The computer “rolls” a 100-sided dice and you end up with a 72% chance of a $5 total and a 28% chance of a $6 total. If everybody played by that rule, everyone would more or less break even, and we could eliminate using change.

    The downside: you’d need both the buyer and seller to agree to this ahead of time, and approval from the government who might try to say its gambling. Not to mention someone would need to inspect the machines for shenanigans.

  17. mbhunter says:

    You’re evil. Pure, extra-strength evil. 😉

    People will hoard anyway. It’s Gresham’s Law at work. Hoarding happens because the cent is on its way either out the door or on its way to another devaluation. All banks would need to do is give people 1.2 cents apiece for them and the hoarding problem is largely solved. I’ve seen banks offer 1.1 cents apiece for them at times.

  18. Don’t banks charge now, to convert pennies to real money? I’m not paying the bank — or Coinstar — to take my money.

    “Hoarding” is not what I’m doing when I dump change in a jar. What I’m doing is getting it out of my purse before the darn thing pulls my shoulder out of joint. Change is heavy. I don’t enjoy hauling it around.

    Dollar coins will be even heavier than small change. Paper dollars at least don’t cause you to list to the left or right as you take on cargo. And when coin machine operators have access to dollar coins, that’s all they’ll take: a 75-cent can of pop will go to a buck; a $1.50 can of pop will cost two bucks.

    Probably the best thing you can do with loose change is to spend it, even if the guy behind you in line does get annoyed when you count out pennies and nickels.

    • I’ve heard that some banks do, but I have never encountered this. I always just take in a jug of coins, they run in through their machine and credit my account in the exact amount of the change.

      Then again, my banks have always been local banks.

    • Rob O. says:

      I do the same – I keep a little cup of change in each car and count out pennies, nickels, & dimes to pay for drinks, newspapers, etc.

      I also keep a cup in the garage where I drop only quarters so I don’t hafta rely upon the iffy change machine at the DIY carwash.

    • Shirley says:

      I so agree with you about the weight of coins in a purse! While dollar coins will indeed save the government money, they will cost the consumer more in chiropractor visits.

      Spend it… the guy behind you will have a chance to count out his change while he’s waiting in line for you to finish. 🙂

      • billsnider says:

        Europe uses a lot more coins than we do. Try going out there with your pocket book.

        Bill Snider

  19. Rosa Rugosa says:

    But then what would be put in the big jar???

  20. mike d says:

    If I were the Federal Reserve / the mint (or whoever is in charge of distribution), I would charge a fee for the money produced. Say, $0.0105 for pennies, $0.0525 for nickles, $0.105 for dimes, $0.265 for quarters, $1.04 for dollar bills.

    The big banks would pass those costs to the smaller banks, and eventually the consumer, which would cause us voluntarily use less coins.

    • Rob says:

      This already happens. The US government charges taxes to pay for minting coinage and the Fed charges fees to depository institutions for services.

  21. RW says:

    I only save coins with high melt value: 90% silver coins (worth many times their face value), 95% copper pennies dated 1982 and earlier (worth about 2 cents today), and nickels (worth about 5 cents but expected to rise). I have absolutely no use for those crappy zinc pennies (1983 and later), and the dollar coins that no one wants. I had to practically beg the bank to take some in trade for paper money recently.

    See for melt values and the metal content of specific coins.

  22. Anonymous says:

    Have you considered that the penny is probably the most efficient inflation control. Without the penny, a price raise will go up by 5 cents instead of a few pennies. In Netherlands, when they did away with there penny, prices immediately raised to the next highest nickle.

    • Jim says:

      That’s a good point I didn’t consider but I’ve rarely seen prices go up less than a nickel on the things I buy.

      Also, many companies are shrinking their products before increasing their prices.

  23. Scott says:

    I’m all for killing the penny. While you’re at it, kill the paper dollar and push Americans to use the metric system. Of course none of these things will ever happen because it would be, well, un-American.
    The currency changes wouldn’t have much affect for me because I had maybe twenty dollars of paper currency in my possession in the past year. Plastic, baby, plastic!

  24. Copper Pennies are worth 13 cents.

  25. I like the penny myself.

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